April 9, 2003 – American Airlines announced on Wednesday that it will terminate its ground operations at Cyril E. King Airport on St. Thomas effective April 26 and contract the work out to its subsidiary American Eagle.
An American Airlines executive cited the 25 percent increase in V.I. airport landing and passenger fees instituted by the Port Authority as of Feb. 1 as a major factor in the decision.
The news came in the wake of announcements in March that the carrier would close its ground operations at Henry E. Rohlsen Airport on St. Croix as of April 15 and discontinue American Eagle service between St. Croix and St. Thomas on May 1.
As on St. Croix, "American Eagle will begin providing customer and ground handling services for American's daily flights from St. Thomas to Miami, New York and San Juan" on St. Thomas, a release from the company stated.
American's jet service to St. Thomas will continue unchanged, the release said. The airline has four flights to the island daily — two out of Miami, one from New York's Kennedy International Airport and one out of San Juan.
Minnette Velez, company spokeswoman in San Juan, said the St. Thomas changes will mean the elimination of 29 jobs, many of them held by longtime employees.
According to the release, the affected employees "will be offered options within American Airlines and American Eagle" or can "choose separation from the company."
The St. Croix shutdown of ground operations is putting 10 American Airlines employees out of jobs. American has one daily flight from Miami into Rohlsen Airport.
American Eagle has four flights between St. Croix and St. Thomas Monday through Friday and two on Saturday and Sunday.
"The company is facing an unprecedented financial crisis and continues its efforts to lower operational costs without affecting service to our customers," Phil Olivieri, American Airlines regional managing director for the Virgin Islands, said in Wednesday's release.
The recent Port Authority fee increases "come at a time when air service to the U.S.V.I. is critically needed," Olivieri said. "As a result of these increases — which are very damaging coming on top of the current poor economic situation in which airlines find themselves — we had to reconsider all of our services to the U.S.V.I."
After the Port Authority announced its fee increases, most national airlines serving the territory indicated they would rethink their level of service to the territory. The Caribbean Hotel Association, which represents some 1,100 hotels in 34 associations in the region, called on Gov. Charles W. Turnbull and the VIPA board just last week to reconsider the fee increases.
"The tourism industry worldwide, and the Caribbean tourism industry in particular, has struggled for the past two years to recover from the most serious crisis in its history," Simon Suarez, CHA president, said. "With airlines reducing capacity in response to the challenges of the current economic situation, compounded by the conflict in the Middle East, both public and private sectors need to strengthen their cooperation and consider the long term consequences of any measure."
Suarez cited a letter written to Turnbull by David Yamada, president of the St. Thomas-St. John Hotel and Tourism Association, stating that "we have already witnessed the airlines' expeditious moves to stop their financial hemorrhaging with flight reductions, elimination of services and layoffs … the direct loss to our economy would far exceed $25 million."
According to a report in Wednesday's V.I. Daily News, the Port Authority's executive director, Darlan Brin, has formed an "in-house committee" that now is "looking at ways to see if it's possible to lower the rates." That is something that the VIPA board, which is chaired by Tourism Commissioner Pamela Richards, previously said was not possible. (See "VIPA board stays firm on airport fee hikes".)
Velez said American is not considering cuttting back on its flights to St. Thomas. "This is a very important market for us, and we've been here for 30 years," she said. But, she added, something has to give "when you are trying to cut expenses and then you have fee increases."
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